Working Papers

Since the early 1990s the Government of India initiated significant reform in the electricity sector to improve technical, commercial and managerial efficiency. Orissa was the first state in the country to experiment the power sector reform because of potentially weak resistance from politically sensitive stakeholders such as farmers and employees of the State Electricity Board. Since the beginning of reform from mid 90s in the state, it has made significant progress by unbundling electricity generation, transmission and distribution and privatising some of the generation facilities and entire distribution network. Power sector reform in Orissa has not brought the desired results such as benefiting all consumers through better quality electricity supply, decreasing average unit cost, significant decline in transmission and distribution cost, improved metering and collection system and energy conservation. The major reasons for this are expectations based on incorrect information about the sector at the beginning of the reform process, lack of experience of private distribution companies in rural area operation, financial constraints, poor employee discipline, government apathy and economic downturn. The study has attempted to assess the impact of power sector reform in the state in general and in rural areas, including agriculture and ground water irrigation, in particular. Useful lessons that can be carried to other states from Orissa experiment have been documented. Experience of innovation in decentralised electricity retailing is also discussed. The study concludes with an observation that privatisation, probably, is not the best route for performance enhancement in the electricity sector.